Empowering E-Consumers

It is a pleasure to be here today to discuss E-commerce and ways to empower E-consumers. I would like to express my thanks to Secretary Locke and the Federal Trade Commission for hosting this event, as well as to the Japanese and Canadian governments and the business community for their support.

The Internet Economy is a fascinating sector. As some people say, it is “amplifying brainpower the way steam engines amplified muscle power during the Industrial revolution”. Not surprisingly, the Internet economy is becoming one of the dynamos for international trade and the global economy as a whole. Over one third of the adults in OECD countries are E-consumers. And in spite of the financial and economic downturn, their numbers continue to grow. On-line retail sales and the range of goods and services available for E-commerce are also on the rise.

Let me share with you some of the OECD views on the strengths, potentialities and challenges of this crucial sector.

Innovation, the heart of the Internet economy and E-commerce

As we address the worst crisis in our lifetime, the Internet economy and the innovation capacity of our economies may show the way forward.

The growing role of E-commerce, in particular, is due in large part to innovation. The advance in mobile technology is a case in point. In my hand, I hold an amazing device. With it, I can determine how to drive to my next destination in the shortest time, avoiding traffic jams. I can find the closest restaurant, check out the menu and make a reservation. While waiting to be seated, I could watch the news, read a book or make a donation to a NGO helping children in Uganda.

Innovation can breed change. It can be a powerful tool to reactivate and transform our economies, to make them stronger, cleaner and fairer. Reducing public spending or private investment on research & development using the crisis as an excuse is a short-sighted policy. Actually, the success of innovative Internet companies has helped to cushion the economic downturn, and they will be an important part of the turnaround.

Eight of the top 10 most innovative companies in Business Week’s 2009 ranking were Information and Communication Technology or Internet-based firms. Combined sales from four global leaders in the Internet sector rose by 30%, to record levels, in 2008. Profits rose by even a greater amount. Further growth has occurred in 2009, with two of the companies, Apple and Amazon, registering new records in sales and profits.

But we must also promote innovation as a tool for more inclusive and greener growth.

Bridging the digital divide and responding to environmental challenges

Developed countries have, until now, been the main beneficiaries of E-commerce. In 2007, over 60% of the population in high income countries were Internet users, compared to less than 20% in low-income countries. In many developing countries, usage was less than 1%. According to Internet World Stats, about 75% of the world’s population still has no access to the Web.

These numbers illustrate the size of the digital divide. But the situation is changing. In 2007, China, India and Brazil were among the top five countries in terms of Internet users, with a combined total of 341 million. Expanding the benefits of the Internet economy to developing economies is part of our mandate. This depends, to a great extent, on the ability to access the Internet at reasonable cost.

The Internet Economy and E-commerce can also contribute to meeting environmental challenges. Migrating from physical to “digital goods”, for example, can have enormous environmental impacts. It can reduce heavy carbon footprints to barely visible scratches. We currently consume over 30 million tonnes of newsprint every year. A quality encyclopaedia could contain over 30 volumes, weigh over 60 kilos and have over 32,000 pages. Delivering these products electronically would substantially reduce paper needs, printing and energy costs associated with their production and delivery. Books, music, movies and software sold electronically over the Internet have positive related environmental implications, as do online ordering, billing and payment. Importantly, new technologies are being developed to enable consumers to monitor and control their energy consumption in real time through the Internet.

Both the “greening” of the Internet Economy and “greening” by the Internet Economy are important and require all our attention. Governments need to continue to ensure regulatory and policy environments that support innovation and the Internet Economy and their “green” applications across sectors. These and other key issues will become the focus of the OECD Green Growth Strategy, which we were asked to develop at the 2009 Ministerial Council Meeting.

But there are other important issues that we have to address to expand the benefits of E-commerce. The issue of security is high on the list.

Through the Seoul Declaration governments committed themselves to strengthening confidence and security in the Internet economy through “policies that i) reduce malicious activity online and ii) ensure that consumers benefit from effective consumer protection regimes and from meaningful access to fair, easy-to-use, and effective dispute resolution and redress mechanisms.”

You, in the consumer protection community, have acted swiftly on the Seoul mandate. The OECD E-commerce Guidelines that you are currently reviewing in follow-up to Seoul have provided us with a good blueprint for protecting and empowering consumers for many years. But much has changed in recent years. It is time for a robust review. This is clear from the background report for this conference, and in the lively debates that are already taking place on many of the issues that you will be discussing today and tomorrow.

In my view there are four key questions that we need to address:

1. How can we remove remaining obstacles to cross border E-commerce? Consumers are not always able to buy goods and services online from other countries. In addition, consumers need help to resolve disputes when they experience problems in buying goods or services online from foreign suppliers.

2. How can we fight online fraud more effectively? In spite of our progress in this area, fraud is still posing threats to consumer confidence. Government agencies are currently receiving hundreds of thousands of complaints every year related to e-commerce and related Internet problems.

3. How can we improve the effectiveness of education and awareness campaigns? Consumers should know what their rights and obligations are when they shop online and when they acquire, use or create “digital products”. They need to know what to do to avoid scams, malware and identity theft, and what they can do if they become victims. Such education needs to start at an early age, with our children. Special attention should also be paid to other vulnerable groups.

4. Finally, how can we better protect privacy and personal information? According to one survey, more than 40% of Internet users say that they are reluctant to buy online, because they fear that their personal information could be stolen or misused. Data breaches have fuelled these concerns and given them legitimacy. We also examine what firms do with the information that they collect from consumers. The market for such information is booming, raising the privacy stakes.

Ladies and Gentlemen,

The issues that E-commerce and, more broadly, the Internet economy, raise are of increasing importance. Our responses to policy challenges require important choices that impact the basic values that steer and govern the Internet economy. It can become a remarkable catalyst for economic progress and inclusion. Today, more than ever, we need to harness the full potential of the Internet Economy to accelerate the recovery, bridge the digital divide, and address global challenges, such as climate change.

Importantly, the further expansion of the Internet Economy will bolster the unrestricted flow of information, freedom of expression, and protection of individual liberties. These are critical components of a democratic society and cultural diversity.

To achieve these important goals, we need to join forces across borders and engage in broad based co-operation among partners from the public and the private sector, civil society and the Internet community.
Today’s conference is an important step in this direction. You have assembled an impressive group of global representatives from government, business, academia, other international organisations and civil society, to launch debate on ways to address key issues. The outcome will contribute importantly to the policy work we will undertake in 2010.

You have had great success developing instruments in the consumer policy area. We need you to succeed once again to address the issues we are dealing with today. The OECD will continue to help you. You can count on us.